Martha’s Preserves has been in the market for only a year but the brand has made its way onto shelves of high-end retailers like Foodhall, Westside Gourmet, and online retailer Big Bazaar. Martha Kohlhagen, Founder, shares the challenges she deals with in the Indian market
Breaking into the market
American born Martha Kohlhagen set up Martha’s Preserves in December 2013 in Bengaluru with only three employees. Today, she has 12. Getting the production unit together and sourcing local ingredients was half the effort for her; establishing ties with retailers and creating (as well as maintaining) good visibility for her brand was the rest. Says Kohlhagen, “Being successful in business is a measure of being patient, particularly in India. When it comes to promoting food products, it is very much a word of mouth phenomena. Indian consumers want to be certain that their money has been well spent, and that they are getting value for money. So, our major challenge is not only in delivering a new brand but also an entirely new product – one that has never been seen in the market and whose flavours are pretty unique.”
Kohlhagen has invested close to Rs 15 lakh since the inception of her company. She sees the Indian market as a long term venture. Besides developing her Indian business, she is looking at exporting in 2015. “Keeping costs down while building the business is a major challenge,” she states. “To grow your business you have to have sufficient capital. There are many good companies out there but it is difficult to sustain business unless you get your return on investment. One has to have a lot of patience, dedication and of course, working capital.”
Martha’s Preserves offers 12 products under 3 categories: preserves, sauces and desserts, all of which contribute 30 percent each to the overall sales. Products are priced between Rs 250 to 320, and come with a minimum shelf life of 12 months. The brand offers 5 collections of jams, of which the fastest moving are pineapple chilli jam and pomegranate orange marmalade jam. There are 3 types of dessert sauces, of which the chocolate fudge sauce is the most popular, and of the 4 savoury sauces, the fastest moving are caremalized onion and apple relish. The largest segment of consumers are women, who love to buy the products for their family, especially children.
All ingredients are locally sourced as Kohlhagen works closely with small farmers who provide organically grown produce. She and her husband also have a farm close to her production unit, and from where she sources the lemons and tomatoes for preparing her products. She points out that most of the farmers are organised, especially the ones who are also engaged in exports.
In Kohlhagen’s view, retailing in India is still largely following a passive model. Retailers tend to simply fill up their store shelves with products, and leave it to the customers to find what they have come to buy. But things are changing, especially due to increasing competition, and so many shops of different formats opening up. This is forcing shop owners to look at different ways to attract customers. They are beginning to improve their service, create a better shopping experience, train staff to understand the products, and are offering a wider selection of merchandise, and making efforts towards proper product placements.
She points out: “When I look at some of the big retailers here like Foodhall and Westside Gourmet, they are making good efforts to enhance their service. They have an impressive range of merchandise, and due to their well thought out placement of products and visual merchandising, customers can go through the store quite effortlessly. Consumers are more aware and discerning, hence they have higher expectations, which retailers must meet or lose out to their competitors. Some retailers whom we have worked with follow a traditional model, wherein they fill their shelves with an enormous amount of products, but there is no organised planning.”
In such a scenario, finding premium shelf space on retailer shelves has been a challenge for her. She finds that the most prominent spaces are occupied by big brands, and has even seen her products disappear from the shelves. “We do not mind investing in a partnership with retailers provided they can assure us of our brand’s visibility and facilitate in-store promos. We have to work together to be successful. Margins really depend on how much they support us, so that we can support them in turn. So, usually we arrive at a 20 to 25 percent margin for them, which is more than what most brands would offer.”
Martha’s Preserves are currently being sold in Chennai, Mumbai and Delhi. She finds several other cities (like Hyderabad) still not open to new products, and remain traditional markets. Business slows down during the second quarter of the year and, like all suppliers, she waits for the festive season to start, when sales boom. Besides being present in online retail channels, Kohlhagen will soon be rolling out the company’s own online portal as she is keen to make her products accessible to consumers in every way possible.
Considering the increasing awareness, informed decisions, and higher expectations of Indian consumers in recent years, Kohlhagen finds that people are always looking for quality. “They are looking at labels on packages, and want to know the ingredients in the product. They are giving importance to 100% natural products, and are willing to pay more for organic and natural products,” she says.
According to her, setting up a business in Bengaluru has been relatively smooth due to the increasing presence of food and culture societies, and the spate of continental restaurants opening in the city. At cultural and cooking events, she finds the opportunity to engage with people and showcase her products, whose attractive packaging also works to her advantage as people pick them up for gifting.
Sourcing and supply
Kohlhagen informs that sourcing, ensuring quality, and fluctuating prices of raw ingredients are challenges that she has to deal with on a regular basis. Acquiring all the licenses for launching her brand was very time consuming. Making an entry into the northern market meant having to deal with logistics and ensuring timely supply of her products to retail outlets. While some retailers pick up their stock directly from the production unit, others prefer to operate through their central distribution centre. But but there are some who want the products delivered to each of their retail locations, which means additional costs to her.
“For most retailers, we have to service all their individual outlets, manage our stock in their stores, and keep track of their inventory. All this requires a lot of effort and increases our operating costs. As a start up company, it becomes all the more crucial for us for to get strategic placements on retail shelves. Retailers can support our marketing efforts, which in turn will grow the brand’s visibility and drive sales.”
Kohlhagen plans to position Martha’s Preserves as a major player in the next 2-3 years. More products (such as 100% natural apple vinegar and 100% natural honey) are in the pipeline. She plans to launch her own brand of kitchen supplies in the next 2 years, and is looking at exports to Singapore, Dubai, France and U.K. She feels that Singapore would be a testing ground for an entry into other Asian countries, and a good track record of her business will help her enter the U.S market as well.
“I am very focussed on servicing and developing the Indian market, but the reality is that to grow your business, the faster route is through exports. Coming from the U.S, where we have the most demanding customers, and an extremely efficient distribution system, it was difficult for me initially to understand how to make a food products business successful in India, where consumerism is just starting, and the market is more unorganised than organised. Having said that, online retailers have figured out a new way of doing business, and this channel will impact India’s retail business in a big way five years from now, when the traditional way of shopping will change fundamentally. The Indian market’s traditional aspects, which are inherent (and, therefore, significant), will remain, but consumer expectations will continue to rise and drive change.
Kohlhagen gives examples of Westside Gourmet and Foodhall, which have taken a very modern and forward looking approach to retailing, regardless of the fact that their resources are traditional. “These retailers have driven sales by constantly bringing in new products and brands, and in turn creating demand. India is a country that you can’t define with one stroke. The market here will always be a traditional one, but there is a segment of consumers who are looking for modernity and quality. There are also the trail blazers who are leading the change. Many forward looking companies (in Bengaluru) have employees who travel abroad and are exposed to new concepts, ideas and products, and they bring this knowledge and experience into their businesses in India.”